By Nate Wolf

Analysts at Morgan Stanley downgraded Trade Desk, citing growing concern about both its connected-TV and internet ad segments, in the latest setback in what is proving to be a nightmare year for the advertising-technology company.

The bank's Matthew Cost and Brian Nowak moved Trade Desk stock to an Equal-weight rating from Overweight and lowered their price target to $50 from $80 in a research note Wednesday.

Trade Desk shares were down 10% to $47.14. The stock has fallen almost 60% this year, in part because of a selloff last month, when management issued a disappointing third-quarter outlook and announced the departure of then-Chief Financial Officer Laura Schenkein.

"We have been wrong about the durability of TTD's growth in the face of lingering execution concerns, softness in the open web ad market, and intensifying competition in [connected TV]," Cost and Nowak wrote.

Connected TV -- programming delivered via streaming or smart TVs -- had been a crucial source of growth for Trade Desk, but momentum is slowing. While year-over-year billings growth topped 30% in eight consecutive quarters between 2022 and 2024, according to the bank, that number decelerated to 11% in the second quarter. Morgan Stanley says the issue may be structural.

Morgan Stanley's checks suggest Trade Desk's take rates -- the share of an ad purchase that the company pockets -- are double those of other ad-buying platforms, which has meant mounting pushback from advertisers. At the same time, a competing platform from Amazon.com is making strides, threatening Trade Desk's market, Morgan Stanley said. In just the past few months, Amazon has notched ad deals with Roku and Walt Disney, the analysts noted.

Connected TV is so critical in part because web advertising, where Trade Desk remains the industry leader, is slowing.

Players like Meta Platforms and Alphabet are gaining share in that market through so-called walled-garden advertising, Morgan Stanley noted, while "zero-click search" enabled by generative AI is reducing traffic for content published online. The firm expects Trade Desk to see double-digit annual declines in open web revenue each of the next four years.

In a statement to Barron's, Trade Desk argued that open web advertising remains preferable to walled-garden alternatives. Walled-garden options include platforms such as Meta Ads Manager and Google Ads.

"More and more marketers are becoming wary of the limitations of cheap reach offered by walled gardens platforms that are typically monetizing their own media," a company spokesperson said . "The open internet enables marketers to reach their audience, with objectivity, where they spend most of their digital time, including streaming TV, digital audio, live sports, movies, and journalism. These open internet channels continue to thrive and grow."

Morgan Stanley hasn't taken an explicitly negative view on Trade Desk, but another downgrade isn't out of the question, it said. "Why not downgrade to Underweight?" Cost and Nowak asked.

The pair said that while they are more cautious about the outlook given Trade Desk's recent results, the stock's depressed valuation and low expectations for its performance may mean it doesn't have much further to fall.

"That said, we will be closely monitoring TTD's results in the coming quarter for signs of a shift in trajectory," they wrote.

Write to Nate Wolf at nate.wolf@barrons.com

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September 10, 2025 14:05 ET (18:05 GMT)

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